Grade: (8.6/10)
Not far removed from the real-life stock market saga, Dumb Money offers a fun and accessible recollection of what transpired.
Plot (43/50)
Movie adaptations of significant real-life events can be tricky, especially when said events are still fresh in people’s minds. In this case, job well done. The movie pushes a fast pace to match its relatively short runtime, and while it omits some elements of the saga, it manages to convey the sentiment of the movement by touching on key events. For a general audience, the simplification makes the movie accessible. For those that lived through the incredible journey, it can be an emotional trip down memory lane if you let it.
COVID Lockdowns
The story beings in the summer of 2020 just a few months into the COVID lockdowns. People were stuck in their homes and suddenly had a ton of free time on their hands. Add stimulus checks and commission-free trading to the mix, and all of a sudden you have a new set of retail investors flooding the market. These investors are known by traditional Wall Street players as “dumb money” due to their relative inexperience and lack of understanding of the market’s machinations. They also don’t have access to advanced tools, large sums of money, and get-out-of-jail-free cards. This makes them easy prey for market whales.
The thing is, “dumb money” isn’t actually all that dumb. They may not be as prepared as the institutions, but they still have some knowledge. And on occasion, they get things right. Gamestop (GME) was one of those occasions. Keith Gill had bought a ~$53,000 stake in GME the year prior because he felt the company was undervalued. Astronomical short interest and excessive negative sentiment had pushed the price of the stock to ~$4 a share by the summer of 2020.
That’s when Keith decides to start posting online about his trades. He posts videos on Youtube under the name “RoaringKitty” and on Reddit under the name “DeepF***ingValue.” His thesis slowly gains traction as the price starts going up. He gains a large following from retail investors around the nation and the world. This snowball effect was made possible by the yearning for a sense of community from the months of isolation. What started as a deep value trade was morphing into an exponentially growing movement.
The Movement
The movie excels in its portrayal of how the movement grew. A good chart setup means nothing if there’s no buying momentum. The first big push took the stock to ~$8 a share, effectively achieving a double for early investors. That in itself would’ve been a fantastic return; however, the short interest was still astronomically high, so GME was not done running. A sense of comradery was forming among these isolated investors over subreddits and Youtube videos. They were united in their cause and had one simple directive: HOLD.
Over the next few weeks, the stock had doubled once again. More and more people were joining the movement. Early adopters had already been telling their friends and family. They were met with skepticism and warnings of caution. However, the price action was simply becoming undeniable. Folks were watching ordinary retail investors like themselves make thousands in mere hours. Thanks to Robinhood’s zero commision trading and user-friendly app, getting in the game was easier than ever. TikTok’s rise and young investors’ willingness to post about their positions created a real sense of FOMO for those who had been on the sidelines for months.
All of this led to one of the most extraordinary short squeezes in history. Between January 13th and January 27th, 2021, the price had gone from ~$20 to a close of ~$350, a ~1600% increase. It had reached as high as ~$390, and the momentum was as strong as ever. The following morning, before the markets opened, the price touched the $500 mark. That’s a staggering ~12400% increase from the $4 mark six months prior. For context, that would’ve taken a $10K starting position to $1.25M. And that’s not even considering the exponentially higher gains from trading options. Then the buy button was taken away.
Taking the Buy Button
While retail investors were making crazy amounts buying GME, institutions and hedge funds were losing even crazier amounts shorting GME. Melvin Capital was the most prominent short player. The had held a short position for some time and had continued doubling down as the price rose. Unfortunately for them, the price just kept going up. When they finally exited the trade, they had lost a reported $6.8 billion on GME. This was despite receiving a $2.75B cash injection from other major funds (Point72 and Citadel). When that didn’t work, Citadel resorted to other methods to stop the movement.
This brings us back to January 28th, 2021. Retail investors woke up to discover that the buy button was removed from Robinhood and other brokers. This decision was not communicated by the brokers effectively, so pandemonium broke out. During this time, the popular subreddit “wallstreetbets” had also gone dark on Discord due to “hateful and discriminatory content.” This added to the chaos and created a real sense of panic for the mostly inexperienced investors. Many would go on to sell their positions as that was the only trading option available to them. The stock crumbled under the forced selling pressure and would close the day at ~$64, an ~80% drop.
The Hearing
Over the next few days, Robinhood and other brokers would slowly ease trading restrictions. The Discord server would later be brought back online, and the subreddit had been made public again as well. The stock would resume its run and touch the $350 twice thereafter (once in March and once in June), but it would never again reach its previous heights. The buy button had effectively killed the momentum.
The movement had gained nationwide attention with mainstream media and prominent figures, such as Elon Musk. The movement was so sweeping that it even gained the attention of the government, with the SEC and even the White House publicly stating that they were monitoring the situation. After the buy button was taken, Congress subpoenaed prominent figures for a hearing. This included Keith Gill, Ken Griffin (CEO of Citadel), Gabriel Plotkin (CEO of Melvin Capital), and Vlad Tenev (CEO of Robinhood). The hearing wasn’t perfect, but it did lead to some important revelations.
The DTCC had demanded an additional $3B from Robinhood overnight to continue its normal operations. Robinhood would not be able to raise that amount in such limited time, so they settled on restricting buying for the most volatile stocks (GME and other “meme stocks”) in order to reduce the amount needed to $700M. They would go on to raise that amount and avoid further disruptions, but the damage to their retail investors was done. Additionally, Robinhood’s business practices were scrutinized. after it was revealed that they primarily make their money from Payment for Order Flow (PFOF).
The Aftermath
PFOF involves routing customers’ orders to market makers so that they might front-run these orders. Market makers make a fraction off each trade, but it adds up to billions in revenue a year. This creates an inherent conflict of interest. The practice is controversial with some arguing that it allowed for zero-commission trading and therefore benefits the retail trader. Others argue that the conflict of interest harms retail traders because when it matters most, the brokers would have to side with the market makers over their customers.
This certainly seemed to be the case with the GME saga. Robinhood deals primarily with Citadel Securities, a market maker also controlled by Ken Griffin. Griffin denied having any communication with Robinhood in the leadup to the buy button’s removal, but a later lawsuit revealed this to be categorically false. It certainly appeared as if Robinhood had been pressured into removing the buy button by Citadel Securities. And although no charges were made from the hearing, retail investors are still aggrieved by Robinhood and Citadel’s alleged guilt.
Keith Gill would go silent shortly after the hearing. In his final post on April 16th, 2021, he revealed that he had doubled-down on his position to bring his holdings up to 200,000 shares. The SEC would go on to release an embarrassingly shallow report later that year that claimed that there was no corruption or market manipulation present in the GME saga. Some made a ton of money on the runup and others lost large sums. Some are still holding their positions and have continued to fight for transparency in the markets. The GME saga ended may have ended in defeat, but the movement lives on.
Overall Thoughts
As I said earlier, the story was simplified so that it might appeal to a general audience. I believe this was the right call as it did not compromise the sequence of events. Others may disagree, but I think they focused on the right elements of the movement and made the story accessible. The comedy was an added bonus to the light drama. It created a contrast to some of the more serious moments that effectively highlighted them. Finally, the fusion of actual footage and recordings of the hearing and reporting anchored the story in reality. The final message captured the market corruption that is at the heart of an ongoing movement.
Character Development (12/15)
There’s wasn’t much character development outside of Keith Gill, and there didn’t need to be. The supporting characters had defined roles that enhanced Keith Gill’s development and moved the story along smoothly.
Keith Gill
Keith’s family is depicted to have had a big effect on Keith, and some of it is true. His sister’s death in 2020 is factual, as is his brother supposedly running naked through a lightning storm. It is unclear how much of the rest is true, but in the movie, his parents, brother, and wife all play a big role in his life. When Keith started his position in Gamestop, he was leveraging his family’s modest savings. He had a wife and a baby girl, so he was risking quite alot if things went south.
Before Gamestop, Keith Gill was a relatable individual living an average American life. He graduated in 2009, and like many folks who graduated shortly after the financial crisis, he had a hard time finding a job. After a decade of bouncing around various positions that involved the markets in some way, he landed a job at MassMutual as a securities broker. He would hold this position until being forced to resign after the company learned of his social media fame.
His quirky attitude and ability to stay positive endeared him to many people who were searching for something and someone genuine. His transparency gave others confidence even when he wasn’t so confident. Even when he was under enormous pressure in the Congressional hearings, he held true to who he was and for many, he spoke truth to power. His decision to double down on his position before retreating out of the public eye is seen by many as the final move in cementing his legacy. His thesis made him a millionaire, but his holding made him a legend.
Other Characters
As mentioned earlier, Keith’s family played a big role in his life. Kevin was the sort of “bum” brother that kept him in check with his unfiltered feedback. His wife, Caroline, was the rock that supported him through the toughest moments. His friend, Briggsy, offered a contrarian, Wall Street perspective. Finally, his parents provided glimpses of the skepticism most people with any market experience would have. All supporting characters were, just that, supporting. They were fairly one dimensional, and it worked.
On the other side of things, there were the “bad guys.” Vlad Tenev, CEO of Robinhood, is depicted as this awkward, disingenuous “suit.” His poor response to the situation was well-documented. His failure to communicate earned the ire of his customers and damaged the Robinhood brand. Other whales were depicted from the point of view of the average retail investor. The idea that suits stick together comes from the cash injection that Melvin Capital received from Steven Cohen and Ken Griffin’s hedge funds. The whole point was to show their disconnect from the average investor and to vilify them in line with retail sentiment.
Finally, the other average retail investors were not based on real people. They were possibly based loosely on stories, but that doesn’t matter. What matters is that you had people struggling to contend with the isolation caused by COVID banding together to form a community around the stock. You had hard-working Americans and students whose parents were directly effected by the 2008 crisis all piling into Gamestop as a way to make some money and later as a way to protest market corruption. Showing that from multiple perspectives made the story even more accessible.
Theme/Messages (4/5)
- The big guy always seems to be bailed out at the expense of the little guy.
- Corruption is so deeply ingrained in the US financial system, is it even possible to root it out at this point?
- If you believe in something, are willing to stand your ground, and can garner the support of the general public, you could start a movement.
Acting (15/15)
Paul Dano (Keith Gill) does a brilliant job humanizing Keith. His performance is consistent and emotionally diverse. He sets the standard high for the rest of he cast, and they don’t disappoint. I’m not going to list everyone here because they all did a fantastic job. It’s a truly complete performance from the cast.
Cinematography (12/15)
The cuts to different characters was a great way to show their contrasting backgrounds.